PPP Loans and Solving America's Pathetic Commercial Banks Problem - [MONEY] [PEACE] [NATIONALISM]

Thu Apr 30 00:29:40 PDT 2020

(tl;dr: expand Fannie May and Freddie Mac to get this simple job done!)

--- Education ----------------------------------
Nationalism - re-industrialization - rebuilding America - MAGA

"Sane greed": the ultra wealthy collect, and often covet, wealth.

Spending one's attention, energy and time collecting wealth, seems a little pointless if the store of that wealth (money, bonds, real estate, businesses, the entire economy) is unstable.

A stable wealth pyramid absolutely requires stability on each layer:

   -  The bottom layer, or real economy: small to medium businesses, households, food and basic survival for the majority.

      UBI can provide this to a limited extent, but overall stability of each layer of the pyramid, requires self sufficiency at each layer of the pyramid.

      Part analogy and part reality, we can say this is "vertical integration at the local level", but of course, vertical integration can apply all the way down to the family level (grow your own food, collect your own rainwater, build your own car if you're so inclined, etc).

   -  The middle layer, also (mostly) the real economy, medium to large businesses, industry, manufacturing etc, the middle to upper middle class.

      Stability at this layer absolutely requires stability of businesses - from food and processing, to building, all types of manufacturing, and transport and energy of course.

      Stability in this context means nationalisation - tarriffs to financially protect local (/national) industry/manufacturing etc.

      Engineering the middle class lifestyle on a national level, means middle class self sufficiency - incomes, objects for purchase such as luxury transport, things to do such as travel, and supporting all this with commensurate incomes.

      This is vertical integration at the state and/or national level.

      And before you jump on "think of the starving brown children somewhere in Africa" shitwagon: EVERY country/nation that wants to do this, can do this, modulo the capacity, will and intention of their own people.

         "It is my job first to survive/thrive as an individual, then to care for my family, then community; I share with those further away from my immediate reality, according to my abundance and according to my will arising out of my personal choices."

         EVERY human has these same rights.
         Just not everyone has the same ability, nor intentions, nor aspirations - and that is nobodies fault, and no ones responsibility other than the individual himself.

   -  The upper layer, hedge funds, banks, nation states, oligarchs.

      Stability at this layer is not possible over the long term without stability in the lower layers, since the financialized "economy" is inherently built on the real economy.

--- Problem ---------------------------------
So in the face of the financial/economic apocalypse arising from the global virus shut down, the North American government decided to issue a few hundred billion dollars in low interest loans, specifically to small and medium businesses, to help them weather this extended and extraordinarily financially challenging time.

In the context of a purportedly democratic nation state government, so far so good.

However, public companies (those that raise money on the stock exchange), who via trillions of dollars in "large business" loans (not to mention further trillions in Federal Reserve Bank financialization bailout funds) immediately gouged right into these funds:

   13 Public Companies Agree To Return $170 Million In Small Business Coronavirus Stimulus; Others Are Keeping It
   https://www.zerohedge.com/economics/13-public-companies-agree-return-170-million-small-business-coronavirus-stimulus-others
      At least 13 public companies have agreed to return coronavirus funds meant for small businesses after controversy erupted when the $349 billion Paycheck Protection Program (PPP) ran out of funds, leaving many struggling business owners unable to make ends meet.
      .. The funds returned could provide roughly 825 loans, at the average loan size of $206,000 reported by the Small Business Administration. -Wall Street Journal
         https://www.wsj.com/articles/a-dozen-public-companies-give-back-160-million-in-small-business-stimulus-money-others-say-theyll-keep-it-11587831790
      .. Another public company has applied for roughly $123 million in loans, Ashford Inc., says they'll keep whatever they receive.
      To avoid a repeat, the Small Business Administration (SBA) and Treasury have revised the rules to restrict hedge funds and private-equity firms from accessing funds, though small casinos may still apply. ...

and more to the point, banks have been shafting small businesses bigly, funding only about 6% of the small business "paycheck protection program" applications made:

   Of All The Banks That Shafted Small Businesses Out Of Coronavirus Relief, JPMorgan Takes The Cake
   https://www.zerohedge.com/economics/all-banks-shafted-small-businesses-out-coronavirus-relief-jpmorgan-takes-cake
      While JPMorgan provided loans to virtually all of their commercial banking customers who applied for coronavirus relief through the small business program, their business banking unit - which serves smaller firms - only funded around 6% of applications for the Paycheck Protection Program (PPP), according to Bloomberg.
      https://www.bloomberg.com/news/articles/2020-04-22/jpmorgan-commercial-clients-beat-out-smaller-ones-for-sba-loans
      Of t he bank's more than 300,000 small business customers who applied, only around 18,000 were funded according to the report. Meanwhile, around 5,500 of the bank's commercial banking customers - nearly all of them, received loans through the small business lending program.
      In total, JPMorgan originated a total of $14 billion in loans through the program.
      The data reveal that, in the race to get a loan in the first-come, first-served program, larger businesses had a leg up over smaller ones -- even when applying through the same bank.  ...

and some will remember the big banks balking at the 0.5% interest rate that Trump was asking to be given through this program to these small businesses, and by political pushing, got this rate DOUBLED to 1.0%:

   Wall Street Wins Again: Banks Force Treasury To Double Rate On Small Business Rescue Loan
   https://www.zerohedge.com/economics/hours-its-start-treasurys-small-business-bailout-verge-collapse
      After we warned earlier that the SBA's $350BN Paycheck Protection Program, which is expected to be launched at midnight tonight and is meant to bailout America's small and medium business (<500 employees), may never even get off the ground because the proposed interest rate on the loan of 0.5% is too low lender banks (alongside with various other considerations as listed below) with JPM saying it “will most likely not be able to start accepting applications on Friday, April 3rd as we had hoped", in a press conference late on Thursday, Steven Mnuchin said that he will double the interest rate on the SBA loan from 0.50% to 1.00% in order to appease banks seeking higher interest rates to participate in the Treasury's bailout program and lend money to the same taxpayers who bailed them out 12 years ago.

      These are same banks, mind you, that just sold all $1.6 trillion in securities to the Fed to expand their balance sheets capacity in the past three weeks, and which also just benefited from the Fed's decision to remove Treasurys and deposits from the Fed's SLR test, freeing up another $1.6 trillion in liquidity.

      Furthermore, these loans are guaranteed by the federal government and don’t require collateral, and will be forgiven if funds are used for payroll costs, mortgage interest, rent and utility payments for two months and if businesses retain and rehire employees. So bank don't take any risk - why are they charging any interest at all, or rather why do they have any say in what the rate should be?
      ...

So, the firetrucking American banks in the face of boatloads of cash, cringe at even providing small business loans at a low interest rate WHEN THE LOANS ARE 100% GOVERNMENT BACKED!

There's plenty moral turpitude where that came from:

   Banks To Make Billions On Small Business Bailout
   https://www.zerohedge.com/economics/banks-make-billions-small-business-bailout
      .. Yet some may be "shocked" to learn that like in any government bailout package, the biggest winners here will not be America's vibrant small and medium business sector, which at best will get the bare minimum cash to fund 2.5 months of payroll (this assume the pandemic will be resolved by mid-June) but - drumroll - America's banks.
      As the FT reports overnight, banks stand to make billions by overseeing the distribution of these loans as they receive processing fees, paid by the federal government, for making the loans. The fees will vary with loan size: 5% for loans under $350,000, 3% for loans under $2MM, and 1% for loans greater than $2MM. The loans will not incur a capital charge. ...

So at least some American commercial banks are f___ing disgraceful!

--- Solution ---------------------------------------------
Simple winning solution:

Bypass the leeches!

Expand the ambit/charter of Freddie Mac and Fannie May, that they be authorised to process and issue these loans!

These two federal banks already have the retail outlets, loan application processing facilities, and most importantly, they have the history with many Americans - their customers - and so are able to readily issue such loans to many people.

Problem solved, and JPM et al can go to hell for being such greedy and obstreperous banks!